Tuesday, October 30, 2018

PDVSA Makes Critical Bond Payment

Venezuela’s state oil company PDVSA has made a US$949-million payment on a bond maturing in 2020, Argus Media reports,
citing sources from the financial sector. The report noted that this is
PDVSA’s only bond it has not defaulted on and that the payment included
both principal and interest: US$842 million in principal and US$107
million in interest.

This bond is backed by 50.1 percent of the
stock of PDVSA’s U.S. business, Citgo, with the rest of the stock was
offered to Russian Rosneft as backing for a US$1.5-billion oil-for-cash
deal that last year sparked worry in Washington that Rosneft could come
to control a sizeable portion of a U.S. company if PDVSA defaulted on
these particular payments. At the time, the danger of default was seen
as considerable.

The troubled Venezuelan company also has two more
payments on this bond coming due next year, one a US$71-million
interest installment and another US$842 million in principal payment.

It’s
not clear how much longer PDVSA will be able to continue servicing the
payments on this particular bond, analysts at JP Morgan, Torino Capital,
and Eurasia Group told Bloomberg, which reported
on the upcoming payment last week, saying that the government of
Nicolas Maduro would make the payment due at the end of this month
because it will want to hang onto this key asset as long as possible.

Citgo,
however, itself has debts of US$3 billion, and some of it may have to
be repaid. Earlier this year, Canadian gold miner Crystallex won the right
to tap Citgo for compensation of US$1.4 billion for the forced
nationalization of its assets by the Hugo Chavez government. Russia’s
largest producer Rosneft could also claim
Citgo shares, if PDVSA, which had pledged 49.9 percent in Citgo as
collateral for loans from Rosneft in 2016, defaults on those loans.